For many people, inheritance from their parents comes too late in life. The Institute for Fiscal Studies believes that those born in the 1970’s will be on average 62 years old when their last surviving parent dies.
The wealth of the retired generation would be much better utilised if it were received by children and grandchildren at a much earlier time in their lives, rather than as they approach retirement themselves.
How much more pleasure can a parent or grandparent achieve than seeing their descendants benefiting from their wealth whilst they are still alive? What could be more rewarding than knowing that their wealth, which they are not relying on, can be utilised by children or grandchildren at a crucial time in their lives.
There are tax advantages in passing on wealth during lifetime, especially if the parent is UK domiciled or has assets in the UK subject to Inheritance Tax.
Gifts made more than seven years before death generally fall out of account for UK Inheritance Tax.
There is an annual exemption of £3,000 of gifts each tax year and if you haven’t used last year’s allowance that may be added.
You can make as many gifts of £250 each year as you wish, as long as they are to different people and not to those you have made other gifts to.
You can make annual regular gifts of an unlimited amount each year out of surplus income as long as your standard of living is not affected.
Assets don’t necessarily have to be given outright. The author (Wayne Barnett of Maplebrook Services Limited) has recently arranged for a property, owned by parents and lived in by their son, daughter-in-law and grandchildren to be placed into trust for their lineal descendants. As a result, the “hated daughter in law” will not personally financially benefit apart from living in the house, especially in the event of a divorce.
Trusts can be very useful receptacles to protect assets from scenarios of divorce, bankruptcy, care home fees or loss of benefits.
Finally, we at Maplebrook Services wish all readers a very enjoyable Christmas and a very happy, healthy and peaceful 2021.
For further information and advice on lifetime or legacy planning, please call us on 26 600780 / 99 147650 or fill out the form below to arrange a free consultation.